To protect biodiversity and improve environmental conditions, China has invested billions of dollars in reforestation and payments for ecosystem service programs. Here, we examine the Sloping Land Conversion Program, the largest such program in the world and found that after 13 years of implementation at our study site, it has had negative impacts on natural tropical forests. GIS and remote sensing techniques revealed that both natural forests and natural shrub and grasslands were replaced by non-native monocultural plantations on Hainan Island, China, a key tropical biodiversity hotspot. Under current Chinese policy, these plantations are classified simply as "forests", with the assumption that they are equivalent to natural forests. This lack of a distinction in forest quality has led to substantial deforestation and plantation expansion, including encroachment into protected areas on Hainan. Additional social and economic drivers of these changes were identified by examining the participants in this program and their actions. Without a new ecologically based definition of forests and new goals for reforestation, such programs designed to improve ecosystem services, and forest quality may actually threaten remaining natural forests and other vegetation types in Hainan and in other areas of mainland China.